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When it comes to Fed policy, one of the hottest topics on Wall
Street is the next Fed chair. Who will replace Ben Bernanke? And
believe it or not, Timothy Geithner's name may be resurfacing. Is
it possible that the former Treasury secretary will come to the
rescue of a leaderless and hopelessly divided central bank that
has no real clue where it's going or how fast it should get
there?

Wait a second ... Geithner? Did someone say Geithner? We thought
he retired from government to go home to New York.

Well yes, but not exactly.

A key insider source tells me that Geithner has been leading the
search for Bernanke's replacement. My source, by the way,
predicted a Larry Summers boomlet well before Summers' name
became public. And now my source tells me that the only way to
end the bloodletting between Fed-chair hopefuls Janet Yellen and
Summers is to find a third option. And that third option includes
Geithner, as well as former Fed veteran Donald Kohn.

Kohn, however, is a 70-something old-timer. But Geithner is a
huge favorite of President Barack Obama's. A recent article in
The Hill talks about Geithner as Obama's right-hand man,
and as someone who will be missed if he's left out of the crucial
fiscal and economic battles ahead. And many people on Wall Street
say Geithner knows more about financial markets than Summers and
Yellen combined.

Geithner, of course, was president of the Federal Reserve Bank of
New York during the 2008 financial crisis. And he was an
international advisor under Robert Rubin during the world
currency crisis of the late 1990s. So Geithner has credentials.

Meanwhile, the whole Yellen-Summers story has become a circuslike
fiasco. It's the most political battle for the supposedly
independent Federal Reserve chairmanship that anyone can remember
in the hundred-year history of the central bank. Some analysts
even believe the big jump in long-term interest rates is partly a
function of the Fed losing control of rates in the midst of the
Yellen-Summers swingout. (Incidentally, I believe markets, not
the Fed, control most interest rates.)

But surely, the Yellen-Summers battle has made Bernanke a lame
duck well before his time. His term doesn't expire until January.
But Bernanke didn't even show up at the big Fed confab in Jackson
Hole, Wyo., this month. It's the first time that meeting has been
chairmanless in 25 years.

Fed policymakers are completely divided over the big question of
slowing down, or tapering, the program of $85 billion in monthly
bond purchases. Despite rosy Fed staff forecasts, the real
economy has grown by less than 2 percent in recent quarters and
nominal GDP has advanced only 2.9 percent over the past year.
These figures would normally be associated with recession.

And talk of a second-half rebound lacks credibility, with soft
back-to-school consumer spending and virtually no
business-capital investment. Jobs are rising, but under the
threat of Obamacare these are temporary part-time job gains with
fewer hours worked than the full-time jobs that would
substantially increase incomes.

A few weeks ago there was a tapering consensus for September. Now
it looks to be pushed back to December, and maybe even later. And
international currency blowups in places like India, Brazil, and
Indonesia only complicate the Fed's thinking.

So right now, the question is this: How long can we stomach a
virtually leaderless and directionless Fed?

The answer is not long. And perhaps the solution—and I say
perhaps—is Geithner.

Conservatives have never trusted Geithner because of a
late-tax-payment problem that surfaced during his
Treasury-confirmation period. But he has long apologized for that
and has paid his liabilities. Bigger problems for him include his
participation in the Wall Street bank bailout and his continued
advocacy of the unpopular Dodd-Frank regulatory law.

While I completely disagree with the former Treasury man on Too
Big to Fail and tax hikes on the rich, he's a very bright guy who
understands financial markets and who has always been accessible
to conservatives like myself who may disagree with him.

My biggest problem, however, is that I have never heard him talk
about a rules-based monetary policy. Whether it's the Taylor
rule, a gold-commodity value-of-the-dollar rule, or a nominal-GDP
target, the Fed desperately needs discipline and clarity as it
wiggles out of its bloated $3.5 trillion balance sheet and charts
a long-term course of stable money.

Geithner may have thoughts on these things, but so far as I know,
he has never articulated them. What can be said is that today's
Fed is in a very unstable position, which is not good for markets
or the economy. The sooner the president can end this Fed-choice
thing, the better.